According to a report by the National Community Reinvestment Coalition (NCRC,) banks are predominantly concentrated in wealthy neighborhoods, leaving poor and minority communities without access to basic financial tools such as checking and savings accounts. The NCRC compared bank locations to minority and income data provided by the census. The findings suggest that banks are redlining with devastating consequences.
This report shows in 24 out of 25 MSAs [Metropolitan Statistical Areas], urban areas that have dense populations have fewer bank branches — therefore fewer mainstream banking opportunities — than the less populated suburbs. Without the ability to build relationships with the regulated banking community, working class and minority neighborhoods are more likely to use “fringe” services, such as payday lenders and pawnshops, for small loans. They are also more likely to have their home loans originated with mortgage brokers and subprime lenders, which often led to foreclosures and unmanageable monthly payments.
Houston, Philadelphia, and Los Angeles showed the greatest disparities, compared to the relatively equitable distribution of banks in San Francisco, Seattle, and Boston.
The NCRC recommends that banks view poor and minority neighborhoods as an “untapped market area ripe for expansion.” In case that doesn’t work, the report suggests regulators revamp their application of the Community Reinvestment Act, the landmark anti-redlining legislation passed back in 1977. — CAREY GREENBERG-BERGER